A number of regulators, especially in Europe and the Far East, are evaluating the impact of NGN transition for their sector and for the wider economy. Of these, Ofcom (UK) is by far the most advanced in its thinking followed to some extent by the regulators in Singapore (IDA) and Netherlands. Some other regulators are in the process of concluding their consultations on the subject and are pushing industry led initiatives to regulate the transition to NGNs.
Regulators seem to be alike in their thought process on regulating NGNs and on creating policies to aid its transition. Key thought processes of some of the regulators are summarized below:
• They acknowledge that the transition to NGNs is a fundamental shift and that it offers an opportunity to set in place policies before the transition (as opposed to being ex-post as is the case for legacy networks)
• They also acknowledge that the investment in NGN is risky and clear regulatory policies offer one way to help operators reduce this risk. For example, regulators fear that if NGN investment and decisions are left entirely to the market, it could develop in such a way, which could have adverse impact on the industry.
• One key concern of regulators is that incumbents (state owned TELCOs/Ex-state owned TELCO’s) will reap the most advantage from the transition to NGNs as compared to other operators, the competitive advantage being driven from the network depth and control over the transition timetable.
• On the flip side, the other concern is just the opposite viz. the telecom community will lose out to the low capex IT community e.g. voice services losing to VoIP providers, Video loosing to IPTV providers etc. The outcome that is cause of concern is that telecom players may become pure access providers with all application services (voice, messaging, video, gaming etc.) being provided by others.
• They also seem to be increasingly confident of ‘delegating’ certain aspects of regulation (e.g. basis for charging for interconnection products, details of transition time-table etc.) to the industry. For example, regulators in UK, Netherlands and Singapore are evaluating options to closely involve industry players to evolve some way for industry ‘self regulation’ on the technical aspects
• Regarding timing, there is a mixed view among regulators. Some regulators (mainly FCC) believe that regulation would make sense once clear network plans and strategies are in place. However, it seems that this is a minority view, with most regulators wanting to evolve policy and regulation in parallel with the technology transition. Thus, for example in the UK, the transition to NGN is expected to take till 2009 but Ofcom has already completed two rounds of consultation, has set forth its views on high level policy issues and has set up an industry body for managing the rules of transition (called NGNCo)
• While there are few public announcements on policies that help make the NGN investment climate favourable, regulators are debating a number of options. These include adjusting the allowed rate of return (used to compute Interconnect usage charge/ wholesale prices) that recognises the additional risk, exploring options for access and service level competition, evaluating additional interconnection products, providing clarity on transition plans with associated incentives and penalties etc.
• They are less sure of need for specifying technical standards for NGN, though they realise that investment risk can be significantly reduced if all operators in the industry follow the same standard. Ofcom has adopted a middle-of-the-road policy of trying to evolve a common set of specifications through industry consultation.
Feedback from the industry suggests that many operators would like clarity on IP telephony as a first step on offering clarity on NGN policy. As per them, this is important, as voice will continue to be the most important service even in the NGN environment.
Regulators across the world have taken cognigance of the fact that IP telephony will happen anyway as the technology provides clear customer benefits and lower prices and it is commented that prohibitive regulation will only drive it to grey route. IP telephony is good for consumers offering benefits of cost, nomadicity and other features and Govt. should generally like to encourage such technologies. IP telephony could help drive innovation in the telephony service market and potentially improve the overall service capability of the industry. There is also a well-established view that IP telephony could drive take-up of Broadband and the transition to NGN technologies. Many regulators believe that this take-up would help drive other national and consumer benefits.
However, at the same time, some regulators are worried that the transition to IP telephony will hurt incumbent voice revenues, especially so in countries where rural teledensity is driven primarily by the Govt. owned incumbents or through USO subsidies contributed by voice operators. Their other concern is that the current numbering scheme (E.164) could be under threat in VOIP environment and this could involve additional investment that does not directly result in an increase in the national penetration levels
From the above, the following key trends are clearly visible from recent regulations across the world on IP telephony:
• Regulators are pushing tiered licencing approaches, with separate regulatory conditions imposed on IP telephony, which is a direct PSTN substitution i.e. phone-to-phone (POTS) VOIP and PC originated i.e. PC-to-PC and PC-to-phone VOIP.
• While all regulators are considering mandate for emergency access and lawful interception and monitoring, many (especially in Europe) are considering giving IP telephony a ‘grace period to comply’, the reason being that they do not want to put forth conditions that might delay VOIP service roll-out or result in promoting grey routing using VOIP .
• Many regulators are pushing dedicated numbering for IP telephony meaning allocating a separate access code for VOIP provider like any other PSTN/ mobile operator in line with E.164 numbering system. There is also a trend towards increasingly allowing option for geographical/ non-geographical numbers (IN based/ E.num based) for IP telephony (as in US, Canada, UK, France, Japan etc.).
• The general consensus is for forbearance from retail price control (except Canada). The thinking is that IP telephony will need to be cheaper than PSTN voice to be attractive and therefore the tariff for the same should be allowed to be driven by the market.
• Regulators in developed markets are mandating VoIP-PSTN interconnection though usually the commercial agreements are left to mutual negotiations between the parties concerned i.e. the PSTN operator and the VOIP operator. Regulators in less developed markets where competition has not fully evolved normally need to specify the guidelines and terms and conditions of such interconnection agreements between PSTN and VOIP operators.
• QoS obligations on VoIP are becoming an exception i.e. many regulators are going for forbearance on this. The general view is that consumers are best judges of quality. Also, in the long-term, due to technological development in IP, the QOS is not going to remain an issue any more.
Regulators seem to be alike in their thought process on regulating NGNs and on creating policies to aid its transition. Key thought processes of some of the regulators are summarized below:
• They acknowledge that the transition to NGNs is a fundamental shift and that it offers an opportunity to set in place policies before the transition (as opposed to being ex-post as is the case for legacy networks)
• They also acknowledge that the investment in NGN is risky and clear regulatory policies offer one way to help operators reduce this risk. For example, regulators fear that if NGN investment and decisions are left entirely to the market, it could develop in such a way, which could have adverse impact on the industry.
• One key concern of regulators is that incumbents (state owned TELCOs/Ex-state owned TELCO’s) will reap the most advantage from the transition to NGNs as compared to other operators, the competitive advantage being driven from the network depth and control over the transition timetable.
• On the flip side, the other concern is just the opposite viz. the telecom community will lose out to the low capex IT community e.g. voice services losing to VoIP providers, Video loosing to IPTV providers etc. The outcome that is cause of concern is that telecom players may become pure access providers with all application services (voice, messaging, video, gaming etc.) being provided by others.
• They also seem to be increasingly confident of ‘delegating’ certain aspects of regulation (e.g. basis for charging for interconnection products, details of transition time-table etc.) to the industry. For example, regulators in UK, Netherlands and Singapore are evaluating options to closely involve industry players to evolve some way for industry ‘self regulation’ on the technical aspects
• Regarding timing, there is a mixed view among regulators. Some regulators (mainly FCC) believe that regulation would make sense once clear network plans and strategies are in place. However, it seems that this is a minority view, with most regulators wanting to evolve policy and regulation in parallel with the technology transition. Thus, for example in the UK, the transition to NGN is expected to take till 2009 but Ofcom has already completed two rounds of consultation, has set forth its views on high level policy issues and has set up an industry body for managing the rules of transition (called NGNCo)
• While there are few public announcements on policies that help make the NGN investment climate favourable, regulators are debating a number of options. These include adjusting the allowed rate of return (used to compute Interconnect usage charge/ wholesale prices) that recognises the additional risk, exploring options for access and service level competition, evaluating additional interconnection products, providing clarity on transition plans with associated incentives and penalties etc.
• They are less sure of need for specifying technical standards for NGN, though they realise that investment risk can be significantly reduced if all operators in the industry follow the same standard. Ofcom has adopted a middle-of-the-road policy of trying to evolve a common set of specifications through industry consultation.
Feedback from the industry suggests that many operators would like clarity on IP telephony as a first step on offering clarity on NGN policy. As per them, this is important, as voice will continue to be the most important service even in the NGN environment.
Regulators across the world have taken cognigance of the fact that IP telephony will happen anyway as the technology provides clear customer benefits and lower prices and it is commented that prohibitive regulation will only drive it to grey route. IP telephony is good for consumers offering benefits of cost, nomadicity and other features and Govt. should generally like to encourage such technologies. IP telephony could help drive innovation in the telephony service market and potentially improve the overall service capability of the industry. There is also a well-established view that IP telephony could drive take-up of Broadband and the transition to NGN technologies. Many regulators believe that this take-up would help drive other national and consumer benefits.
However, at the same time, some regulators are worried that the transition to IP telephony will hurt incumbent voice revenues, especially so in countries where rural teledensity is driven primarily by the Govt. owned incumbents or through USO subsidies contributed by voice operators. Their other concern is that the current numbering scheme (E.164) could be under threat in VOIP environment and this could involve additional investment that does not directly result in an increase in the national penetration levels
From the above, the following key trends are clearly visible from recent regulations across the world on IP telephony:
• Regulators are pushing tiered licencing approaches, with separate regulatory conditions imposed on IP telephony, which is a direct PSTN substitution i.e. phone-to-phone (POTS) VOIP and PC originated i.e. PC-to-PC and PC-to-phone VOIP.
• While all regulators are considering mandate for emergency access and lawful interception and monitoring, many (especially in Europe) are considering giving IP telephony a ‘grace period to comply’, the reason being that they do not want to put forth conditions that might delay VOIP service roll-out or result in promoting grey routing using VOIP .
• Many regulators are pushing dedicated numbering for IP telephony meaning allocating a separate access code for VOIP provider like any other PSTN/ mobile operator in line with E.164 numbering system. There is also a trend towards increasingly allowing option for geographical/ non-geographical numbers (IN based/ E.num based) for IP telephony (as in US, Canada, UK, France, Japan etc.).
• The general consensus is for forbearance from retail price control (except Canada). The thinking is that IP telephony will need to be cheaper than PSTN voice to be attractive and therefore the tariff for the same should be allowed to be driven by the market.
• Regulators in developed markets are mandating VoIP-PSTN interconnection though usually the commercial agreements are left to mutual negotiations between the parties concerned i.e. the PSTN operator and the VOIP operator. Regulators in less developed markets where competition has not fully evolved normally need to specify the guidelines and terms and conditions of such interconnection agreements between PSTN and VOIP operators.
• QoS obligations on VoIP are becoming an exception i.e. many regulators are going for forbearance on this. The general view is that consumers are best judges of quality. Also, in the long-term, due to technological development in IP, the QOS is not going to remain an issue any more.
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